Regulation is the biggest driver of change for mutual funds and money market funds, according to a new EY survey, and it may have consequences beyond higher costs.
Heightened regulatory demands anticipated to fall on managers and their products means increased costs of doing business. For financial advisors, this may mean higher costs of products for their clients or, if costs become too high, potentially avoiding such products in favor of more passive investment methods.
The impact may be lower margins on existing products or higher breakeven points for new products, which might cause managers to delay or even put off certain new product launches, says Matt Forstenhausler, EYs regulated funds leader. In addition, he says the popularity of alternative products and changing demographics might cause managers to change their marketing strategies, embracing social media for example, and launch products that meet these anticipated changes.
The asset management industry has been subject to an increasing amount of new regulations such as newly proposed changes to money market funds that would float NAV for institutional funds and impose gates under certain liquidity conditions, says Forstenhausler.
The survey, which consisted of interviews with more than 40 managers of regulated funds representing approximately 30% of AUM of regulated funds globally, notes that a majority of managers expect that regulatory requirements will continue to increase and impact the money management industry in the future. The percentage of respondents that cite regulatory impacts leads one to think that the expectation is for significant increases in the regulatory burden on investment managers and their products, Forstenhausler says.
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